Correlation Between Algoma Steel and SCHNITZER STEEL

Can any of the company-specific risk be diversified away by investing in both Algoma Steel and SCHNITZER STEEL at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Algoma Steel and SCHNITZER STEEL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Algoma Steel Group and SCHNITZER STEEL INDUSTRIES, you can compare the effects of market volatilities on Algoma Steel and SCHNITZER STEEL and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Algoma Steel with a short position of SCHNITZER STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and SCHNITZER STEEL.

Diversification Opportunities for Algoma Steel and SCHNITZER STEEL

0.49

Correlation Coefficient

Algoma Steel  SCHNITZER STEEL

Very weak diversification

The 3 months correlation between Algoma and SCHNITZER is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and SCHNITZER STEEL INDUSTRIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCHNITZER STEEL INDU and Algoma Steel is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Algoma Steel Group are associated (or correlated) with SCHNITZER STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCHNITZER STEEL INDU has no effect on the direction of Algoma Steel i.e., Algoma Steel and SCHNITZER STEEL go up and down completely randomly.

Pair Corralation between Algoma Steel and SCHNITZER STEEL

If you would invest  1,014  in Algoma Steel Group on September 15, 2024 and sell it today you would lose (6.00) from holding Algoma Steel Group or give up 0.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Algoma Steel Group  vs.  SCHNITZER STEEL INDUSTRIES

Algoma Steel Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Algoma Steel Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Algoma Steel is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

SCHNITZER STEEL INDU

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCHNITZER STEEL INDUSTRIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, SCHNITZER STEEL is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Algoma Steel and SCHNITZER STEEL

The main advantage of trading using opposite Algoma Steel and SCHNITZER STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, SCHNITZER STEEL can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SCHNITZER STEEL will offset losses from the drop in SCHNITZER STEEL's long position.

The idea behind Algoma Steel Group and SCHNITZER STEEL INDUSTRIES pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.